Bank Stocks Fall on Global Growth Worries
September 03 2019 - 3:35PM
Dow Jones News
By Jessica Menton
Bank stocks came under pressure Tuesday as weak manufacturing
data and a drop in bond yields renewed fears over a slowdown in
U.S. economic growth.
A closely watched gauge of U.S. factory activity showed the
manufacturing sector contracted in August for the first time since
2016, raising concerns about demand for bank loans for everything
from the housing market to the auto industry.
The KBW Nasdaq Bank Index of large commercial lenders fell 2.1%
on Tuesday, on pace for its biggest one-day percentage loss since
Aug. 23. Investors tend to track the financial sector because bank
stocks are thought to reflect the health of the broader American
economy.
Shares of Goldman Sachs Group Inc. and Bank of America Corp.
fell 3.1% and 2.6%, respectively. Meanwhile, JPMorgan Chase, Wells
Fargo & Co., Citigroup Inc. and Morgan Stanley each fell at
least 1.2%.
The broader S&P 500 dropped about 1%.
Bond yields also slid, with the yield on the benchmark 10-year
U.S. Treasury note falling to 1.462% Tuesday, according to
Tradeweb, compared with 1.503% Friday. Yields fall when bond prices
rise.
A drop in bond yields, especially for longer-dated debt,
typically hurts bank stocks because their profit margins tend to
expand when there is a larger difference between short-term deposit
costs and longer-term lending rates.
Investors also have raised bets that the Federal Reserve will
cut interest rates again this year, which could potentially weigh
on bank margins. But some analysts said that questions surrounding
central-bank policy aren't the only thing that have been weighing
on investors' minds. The ongoing trade war between Washington and
Beijing threatens to crimp corporate profits.
"It's more of a confidence problem when it comes to banks
because companies are more apprehensive about investing in their
business with the backdrop of a trade war going on," said R.J.
Grant, director of equity trading at KBW Inc. "The rate picture is
just one thing to monitor, not the predominant thing."
(END) Dow Jones Newswires
September 03, 2019 15:20 ET (19:20 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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